Dwindling orders, falling budgets, no contingency plan: SOEs devastated by state capture, report finds

Parliament's Portfolio Committee on Public Enterprises said in its newly released oversight report into state-owned companies that South African parastatals were still reeling from the effects of state capture, calling for support from the Department of Public Enterprises.

The committee made its oversight visits to the state-owned entities in late August and the final report was completed in November. The report was released in Monday's circular of announcements and tablings from Parliament.

The report is the result of oversight visits and walkabouts at the headquarters and operations of various state-owned entities.

The oversight visit saw the committee make house calls to Transnet, South African Airways, Transnet, Eskom, Denel and South African Express Airways.

The report said various reforms were being considered to assist state-owned companies, especially South African Airways, that were looted during the years of state capture.

"Resulting from certain processes of engagement state-owned companies restructuring and transformation could be experienced. Some proposals include private sector participation," said the report.

SAA/ Mango - 'many interventions'

The committee report said SAA had a debt of R12.7bn, which comprised of R9.2bn legacy debt and R3.5bn working capital facility.

"A portion of the capital injection will be used to repay the R3.5bn working capital facility and R2bn will be used to meet the airlines working capital requirements. The success of the long-term turnaround strategy is dependent on a capital injection of R21.7bn," the report said.

According the report, company required R2bn to fund working capital in 2019/20 by December 2019 and would negotiate with lenders the R2bn working capital funding.  

"The Department of Public Enterprises has implemented many interventions to stabilise the companies, by appointing ethical and capable leadership, taking action against those who have been implicated in wrongdoing," said the report.

The report said Department of Public Enterprises was working closely with law enforcement agencies and the Zondo Commission of Inquiry into state capture to ensure those implicated are brought to account.

Transnet - lack of support

The committee report said Transnet Engineering suffered from a lack of support from government and a lack of partnership among SOEs to bolster industrialisation and growth.

"The capabilities of the division are under-utilised and public institutions such as South African Police Services and Passenger Rail Agency of South Africa do not use these capabilities, hence most tenders for the manufacturing of passenger rail coaches are given to foreign companies," the report said.

Denel - declining orders

The committee noted challenges at Denel and its subsidiary Denel Pretoria Metal Pressings, including reputational damage following its involvement with VR Laser, and liquidity trouble.

"Due to the declining budget of the South African National Defence Force, the orders have declined and the company have to rely mainly on international customers," the committee report said.

The report said Denel Pretoria Metal Pressings' plant had dilapidated and old facilities due to lack of investments in new equipment. Some of the factory sites are not in operation causing the business losses and inability to deliver timeously on orders, the report said.

Eskom - 'does not have contingency plans'

Regarding Eskom, the committee report said the system operator faced operational challenges including weather conditions and equipment failures due to failures and copper theft.

"The system operator is design to control and manage demand and supply, in order to minimise the impact of outages and prevent a blackout. Eskom does have contingency plans to prevent blackouts," the report said.

The purpose of the visit was to understand the Department of Public Enterprises' monitoring systems and oversight over state-owned companies.

The visit also sought to assess progress in addressing the governance challenges in state-owned companies and interventions that have been introduced to enhance the department's oversight responsibilities over state-owned companies.